You don’t have to be as big as Dropbox, Uber, or Airbnb to benefit from referral marketing. Your small business can reap great benefits from a referral program as well—it’s an awesome way for you to convert leads and increase your customer base.
What exactly do we mean when we say “referral program?” We’re not talking about a punch-card program or print referral cards for your customers to share with friends. Instead, we’re talking about an official way for your customers to spread the word about your business, and possibly get a cool reward for their efforts.
But why do small business referral programs work, and how can they help your business? Also, what strategies and best practices should you follow when designing a small business referral program? Let’s explore.
Why do small business referral programs work?
Referral programs work because people trust word-of-mouth recommendations from their friends and family more than any other source of information. Yes, they look for reviews online as well, but they’re far more inclined to believe a friend’s recommendation than a review from a complete stranger. A referral program simplifies this recommendation process and makes it more official—your customers can share your business with friends with the click of a button.
But when you start a referral program, how can you increase the likelihood that your existing customers will share your business with their friends? Customer service is key. When you go above and beyond to satisfy your customers, they’ll be more than happy to spread the word about you because they want to see you succeed.
Yes, word-of-mouth recommendations like these usually happen without prompting, so they can often be hard to control. So, why not formalize the process with a referral program, where you give customers an easier way to share (and reward them for doing so)?
How can a referral program help your small business?
Referral programs can help your small business in many ways—here are the top 4 ways we’ve identified.
Creates loyal customers
Referred customers are 18% more likely to remain your customers, and have a higher lifetime value. After all, they trust their friends! And on the other side, incentives for referring friends, such as discounts, store credits, and free products, give your referring customers a reason to keep coming back!
Word of mouth travels fast, especially on social media. Since a referral program makes sharing easier, this cycle will go even faster. When a customer shares your referral program via social media, all of their friends instantly become aware of your brand (and trust what their friend shared). If a few of these friends become new customers, there’s a strong possibility that they’ll also share the referral program with their own friends via social. Thus, the cycle will keep going on and on!
Your small business needs to use its resources wisely. Referral programs are easier and cheaper than other forms of advertising. Customers who spread the word to friends and family provide advertising money can’t buy!
With a referral program, you’re not spending as much money (and valuable time) on customer acquisition, and you’re not targeting complete strangers with traditional ads. Rather, you’re targeting your existing customers, who already have developed a positive relationship with your brand. These loyal customers will promote your business for you, at little to no cost. So, you won’t have to shell out nearly as much on the usual ads.
Plus, most referral program messages include prewritten text from your company itself, but also have space for the referrer to add their own personalized message. And regardless, every referral message comes from a customer, not directly from your brand. People trust the word of their friends far more than they trust traditional ads, so referral programs are a smart play for more reasons than one!
Builds solid relationships
Having a strong customer relationship for any business is important, but for a small business, solid relationships with your customers mean everything. Loyal customers who refer their friends do so because they trust your small business, feel valued as individuals rather than being just a number, and feel like they’re part of your community. Once they hear about your referral program, many of these customers will quickly think of a few friends who would also love what you do, and share your business with them almost immediately. Referral programs help create better relationships because customers who refer friends to you will feel responsible for part of your business’s success.
Referral program best practices for small businesses
Now that you know how your small business can benefit from a referral program, let’s review some of the best practices for small business referral program design.
- Make sure your customers can quickly understand what you want them to do (refer) and what’s in it for them (your incentive).
- Keep your explanation concise, but include all the necessary terms and conditions (Ex. What requirements must customers meet to receive the reward? Are rewards cumulative?)
- Display a clear, enticing referral call-to-action (CTA).
- The most effective CTAs catch customers’ eyes, concisely invite customers to refer, and quickly share the incentive.
- Make sure your CTA is easy to find. Always put it at the top of your referral page. Display it in the biggest font, and consider bolding it. Then, follow it with an easy to find CTA button.
- Make it easy for customers to share your referral program on social media.
- Use referral program software to make managing your referral program even easier.
- Use your position as a small business to your advantage.
- Your small business has a unique personality that big-box businesses can’t duplicate. So, why not inject your personality into your referral program?
- Emphasize being part of a community in your referral program messaging.
- Consider using “feel-good” messaging that focuses on helping friends and your business.
- One example of a “feel-good” message is “share the love.”
- This messaging can include friendship-focused and/or community-focused images.
- Offer valuable but cost-effective incentives that tie right back to your business, such as store credits/service credits, gift cards, and discounts.
- Consider double-sided incentives (incentives for both referrer and friend) and cumulative incentives (stacking credits that can all be used at once).
- Also, consider offering free (or more deeply discounted) products or services, but only after several successful referrals. If you choose this route, gamifying the experience through a “point” system can pay dividends because it shows customers how close they are to the exclusive perk.
- Another route you could take is a raffle drawing, where every referral enters a customer to win a larger gift card, amount of store credit, or other larger prize from your business.
- And never underestimate the intrinsic reward of friends helping friends!
- Charitable giving can also work as a referral incentive, especially when it involves a donation to a charity in your community. For example, your business might donate a set amount to your local food pantry for each referral.
Small business referral program examples (and why we love them)
We’ve rounded up 5 referral programs that provide awesome examples of the best practices listed above, to help you apply them in your own small business referral program.
What They’re About:
Tomlinson Bomberger offers landscaping, lawn care, and pest control services to the Lancaster, PA area.
What We Love:
- Enticing call-to-action (“Referrals | Want to make an easy $50?”)
- Community-minded, “feel-good” referral messaging: “Our business has grown over the decades from all the great referrals from our clients!”
- Company-connected incentive: $50 company credit.
- Cumulative credit: every time a referred friend makes a qualifying purchase, Tomlinson Bomberger rewards the referrer with another $50.
- Friendship-focused image.
- Easy-to-find CTA button.
- Clear referral terms and conditions that state exactly what a “qualifying purchase” is.
What They’re About:
PA Fitness operates fitness centers in Marysville, Washington and Arlington, Washington.
What We Love:
- “Feel-good,” friend-oriented CTA: “Working out is always more fun with a buddy!”
- Concise referral text that emphasizes the “why” behind referring (still friend-oriented): “From the hottest new group exercise classes to one-on-one personal training, the latest fitness equipment, and top-notch facilities – we have you covered. Now, help us cover someone close to you.” Below the CTA button, there’s also the text that reads, “Your friends will thank you.”
- Easy-to-find long blue CTA button (“Invite my friend”).
- Friendship-focused image of women working out together.
- There’s no extrinsic incentive, but the intrinsic incentive of helping a friend is pitched so well that an extrinsic reward isn’t really needed.
Borst Landscape & Design
What They’re About
Borst Landscape & Design offers landscaping design and maintenance services to Allendale, NJ and the surrounding area.
What We Love
- Enticing, company-connected incentive: $125 credit towards any future services from Borst.
- Cumulative incentive: “This is not a “one time only” credit, but instead applies for every new client that you refer who signs with us.”
- Concise offer text with clear terms and conditions: “For every new client that signs a contract with Borst Landscape & Design and mentions the name of the client that referred them, we will be issuing you an immediate $125 credit.”
- “Feel-good” referral messaging emphasizes how referrals help friends and Borst:
- “As a way of thanking our valued customers for referring us to their friends, family, neighbors, and others, we would like to reward you with a credit on your current invoice.”
- “We very much appreciate your business and as our company grows we would like you to be part of our success!!”
- Clear referral terms and conditions (referrals must be new clients and sign a contract).
No Place Like Home Pet Sitting
What They’re About:
No Place Like Home Pet Sitting offers pet sitting services to the Lithia, Florida area.
What We Love:
- Community-minded messaging: “We love our clients and want to thank you for trusting us with your precious pets. There is no greater compliment than when our valued clients refer us to their family, friends, and neighbors. To show our appreciation, we are proud to announce our new referral program.”
- Enticing, company-connected referral reward: “Whenever you refer someone to No Place Like Home Pet Sitting and they become a new client, you’ll receive 10% of their invoice off your next invoice.”
- Cumulative, unlimited incentive motivates customers to keep on referring!
- Easy social sharing: easily accessible Facebook “Share” button lets customers share the business right from the referral page.
- Clear referral terms and conditions (clients must be new, and must complete their first service).
- Charitable element: “If you are a 501(c) 3 charity and you refer clients to us after a client completes their first sitting, you’ll receive 20% of their first bill as a thank you and to help in your rescue efforts!”
What They’re About:
YogaWorks is a yoga studio franchise. Yes, YogaWorks is a larger business, but smaller fitness studios (and other small businesses) can still pick up great tips from their referral program!
What We Love:
- Eye-catching, large CTA: “Share YogaWorks and get rewarded.”
- Enticing CTA button (“Free week for friends”).
- Company-connected incentives tailored to different customer situations ($25 off monthly payment for monthly members; free class for class pack holders; free additional week of membership for annual members).
- Friend reward for new referred customers (free week of yoga).
- A concise explanation of referral program.
- Appeals to intrinsic rewards of referring to help friends: “Yoga is better with friends;” “grow your practice and have fun with friends and family.”
- Cumulative incentives give customers a reason to keep on referring.
- Referral FAQ answers customers’ most common questions about the referral program and makes the process frictionless.
Small business referral programs are an awesome way to get your customers to spread the word about your business, at a much lower cost than other marketing efforts. Your customers will feel like a valuable part of your business’s success, so your relationship with them will grow stronger. Plus, you’ll gain new customers who are more likely to keep coming back to your business. After all, people trust their friends and family more than any messages that would come directly from your business.
Be sure to offer incentives that tie back to your business, like credits, discounts, or gift cards. Use “feel-good” messaging that emphasizes friendship, community, and helping your business. And consider using referral program software to make managing your referral program even easier.
Interested in starting a referral program?